If you’ve recently graduated from college and started your first job, you’re probably feeling overwhelmed with new financial responsibilities. After all – the prospect of student loans, employer tax forms and budgeting can quickly become overwhelming.
Nonetheless, this time in your life is a great opportunity to establish good financial habits. We’ve put together five smart money moves that are easy to implement and will set you up for future financial success.
Smart money move #1
Review your student loans and determine if it makes financial sense for you to consolidate your debt.
Combining loans into one consolidated payment is not only simpler but often leads to lower monthly payments. Study the terms and fees and then make an educated decision about whether loan consolidation is right for you.
Smart money move #2
Take advantage of your employer’s 401(k) plan and begin contributing immediately.
Although it might seem strange to start saving for your retirement as a newly-minted college graduate, it can make a huge difference in the years ahead. Why? It all boils down to the time value of money. Even small amounts, when compounded over long periods, can result in thousands, or even millions, of dollars in additional wealth.
Smart money move #3
Become conscious of your credit score and determine if improvement is needed.
Your credit score impacts virtually all major financial occurrences in your life. It will play a role in your ability to rent an apartment, qualify for a loan, buy a house or even get a job. It can also affect how much you’ll pay on interest charges, insurance and even cell phone contracts.
If you have not established a credit history, now is the time to begin to do so. If you’ve been using credit cards for a while, determine your credit score and take the necessary steps to ensure your credit will stay strong.
Smart money move #4
Develop a savings plan and begin setting aside money for an emergency fund.
Unless you have a system to save, it will be challenging not to spend the money immediately. Establish automatic transfers from your checking into your savings account, or ask your employer to deposit money directly into your savings account. Don’t feel as though you have to set aside large amounts of money immediately. Every dollars helps!
Part of those savings should be directed to an emergency fund. An emergency fund, also known as a safety net or rainy-day fund, is an easily accessible chunk of money, that you can fall back on when you are faced with an unexpected expenditure, such as medical costs, car repairs or the loss of a salary. Most financial experts recommend 3-6 months’ worth of living expenses. In most cases this will give you enough money to address the issue and develop a new long-term financial plan.
Smart money move #5
Create a budget.
You’ve probably heard lots of people tell you how important it is to create a budget. And they’re right! A budget allows you to better see where your money is going – and where it needs to go. By controlling your spending you will be able to save more effectively for vacations, a new car, a home and other big purchases. Setting a budget doesn’t have to be hard:
- Gather all the financial statements you can.
- Determine your monthly income.
- Create a list of monthly expenses.
- Break expenses into fixed and variable expenses.
- Review your expenditures and determine where you can reduce your spending.
For more information on how to set a budget, review our “How to set a family budget and stick to it” article.